Still Making Low-Credit Loans

Featured in a column in the Los Angeles Times today is Leo Simpser, the managing director of the Hispanic National Mortgage Association, based in San Diego.

Despite the crunch in the mortgage market among lenders focused on low-credit consumers that has garnered the attention of Wall Street and the media this month, Simpser said his association will continue to make loans to those types of consumers.

From the column, by Times writer Rick Wartzman:

… though it’s focused primarily on the Latino community, the company’s aim is to provide home loans — at rates much closer to prime than sub-prime — to a range of immigrants and others historically locked out of the market.

There’s “a huge business opportunity” in lending to folks who “fall out of the typical box,” Simpser says. What HNMA has done is create “a new box that fits these borrowers.”

The association launched six months ago. Its executives responded to a growing segment of the population who have little or no credit history in the United States but have other ways of measuring their ability to make loan payments — regular payments to family members in Mexico or Central America, for example.

If nothing else, HNMA’s foray into the mortgage industry is an excellent reminder that the troubles afflicting the sub-prime sector — as punctuated by Irvine-based New Century Financial Corp. teetering on bankruptcy — shouldn’t become an excuse to abandon efforts to extend credit to the underserved. The mess is mainly the result of tens of thousands of brokers who, in hot pursuit of their next commission, seduced these people with perilous, adjustable-rate mortgages whose interest rates can hit as much as 15%. In some instances, the payments due on these time bombs can rise nearly 50% overnight.

— KELLY BENNETT